New Delhi: India’s telecom regulator has reduced tariffs for a communications protocol used in mobile banking and payment services to a third of the existing rates in a bid to widen financial inclusion and propel the move towards cashless transactions.

The Telecom Regulatory Authority of India cut the tariff to 50 paise a session to benefit consumers with feature phones who make up more than 65% of the country’s 1 billion-plus mobile phone users. The protocol, known as USSD or Unstructured Supplementary Service Data, is most commonly used for checking talk time balances or account information and for mobile banking transactions.

“We hope that with these (changes), there will be a huge scaling up of financial transactions,” Trai chairman RS Sharma said. “I think it should become an order of magnitude larger, which is about 10 times,” he added, when asked about the expected rise in transaction volumes.

The decision Tuesday coincided with a move by top telecom companies to waive USSD charges till December 31 following the demonetisation of high-denomination currency notes. Consumers won’t be charged for mobile banking and payment transactions till the year end and will pay a lower tariff from January 1.

“To support customers during the ongoing demonetisation exercise, Bharti Airtel has waived transaction charges for all USSD-based mobile banking transactions over its network till December 31,” a company spokesperson said.

“As several million customers use feature phones, we are hopeful that this free access to mobile banking will encourage them to adopt it as their preferred and convenient mode for banking,” Vodafone India MD Sunil Sood said.

USSD uses short code for making transactions or inquiries - for instance, checking talk time balance or bill due date from an operator. It does not need a data connection, making it accessible to all people who use mobile phones, even the most basic feature phone.

The protocol has been adopted by the National Payments Corporation of India to create the National Unified USSD Platform, which brings together banks and telecom companies and allows users to access mobile banking services by keying in *99# from their mobile phones.

The USSD channel is generally used for balance inquiry, peer-to-peer dealings, deposits and withdrawals via banking correspondents, which are counted as basic banking transactions. Each session, currently charged at Rs 1.50, allows five transactions steps.

Apart from lowering the tariff, Trai increased the number of steps per session to eight. It said the high tariff was one reason for low usage of the medium in making mobile banking transactions. About 84 lakh transactions were made in October, which is low given the feature phone user base of about 650 million.

With 190 million Jan Dhan bank accounts now connected to mobile phone numbers, the potential of USSD for mobile banking transactions increases.

“Usage of USSD channel should be allowed for offering payment services to all the authorised entities regulated under the Payments and Settlement Act, 2007, of RBI and payments being received on Bharat Bill Payment System (BBPS),” Trai said. BBPS, which started in August, supports payment of electricity, water, gas, telephone and direct-to-home bills and will eventually include school and university fees and municipal taxes.

The regulator had issued a consultation paper on reviewing the regulation on USSD services and charges on August 2.

“Trai also asked NPCI to create a task force to look into transaction failure rate and whether apps that do USSD transaction can be optimised further, which will improve convenience and user friendliness,” Sharma added. In May, only 54% of the 36 lakh transactions were successful.

The regulator’s move towards cashless society comes at a time when Rs 500 and Rs 1,000 currency notes have been demonetised, leading to a cash crunch and a spike in cashless transactions through debit cards, credit cards and mobile wallets.

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